Army Chief’s crusade against corruption deserves recognition

BY ARUN AGRAWAL

It should be clear by now to every moron who went on defending the government in the tussle between the Army Chief and the Defence Minister that it was the General who is upright and honest. And that he was made to pay the price for his honesty in trying to clean up the system.

Fighting corruption in the army is not easy. It means war on three different fronts. The politician who is above you, corrupt colleagues who are with you and the moneybags of the arms mafia. Fighting your own is very different from fighting the enemy.

And here we had the most comical situation of an honest General working under an honest Minister. It is a rarity. However, the clash of two honest personalities can be very dangerous, more so if one is manipulated by the corrupt.

Relations had not soured between the two when the General reported the bribing incident to his Minister. Yet all that the Minister did was beat his forehead (for lack of a better phrase). Both admit to the reaction. The Minister counseled that such people should be kept out and the General did not want to pursue the matter further.

While the General’s reaction in being reluctant to take on senior colleagues is understandable, the reaction of the Minister is not.

Defence purchase falls within his domain. In the age of internet it was not difficult for anyone to know that Vectra of UK was not the producer of Tatra trucks but was a middleman. It was also not difficult to know that Tatra was a Czech company, the original manufacturer. It was also not difficult to know the price at which the trucks were being sold by Czeck company Tatra and the price paid by India.

All this information was with the General and that is why he did not sign on the purchase order and wanted to purchase the trucks directly. He knew that India had been procuring the trucks at more than twice the price sold by the parent company.

The General had done his homework. It may be a conjecture but there is reason to believe that he informed the Minster and the reason for keeping out the supplier was over invoicing of over 100% which would have compromised their integrity. It was also the reason for the Minister beating his forehead!

The scam was not in the bribe offered to the General but in the purchase price of the equipment. Could he or his advisers not understand this simple truth.

If a product was being bought at twice the price for which it was available in the open market then it does not require a genius to derive that bribes had been paid. Not only bribes, but large bribes have been paid to lots of people because each one knows the quantum of profit being made by the middleman.

However only a small percentage of the bribe (which is large in absolute terms – Rs 14 crore in this case) was to be paid to the men in uniform, which the General refused. The large chunk of bribe was to be paid to those who were not in uniform. And all these persons were within the jurisdiction of the Minister.

Hence the matter was squarely within the domain of the Minister and it was a major omission on his part not to order investigation on defence purchase worth thousands of crores which were procured for twice the market price.

The scam has been going on for a decade and hence the unity of the political parties demanding the resignation of General VK Singh.

Contrast the ignorance of the Minister with the discovery made by the author (with no resources or staff) in two hours of net surfing. The following information which is a news report from Czech republic is most damning.

Ravinder Kumar Rishi, the chief scamster in the deal, was not only swindling the Indian government but also the Czech government. A criminal case was filed against him in the country where Tatra trucks were manufactured almost a year back for the supplies made to India. The article dated 27/4/11 on a Czeck website states:

Tatra faces tunneling and tax evasion allegations
Anonymous plaintiff accuses the major owner and management of Tatra truck maker of tunneling profits and tax evasion

The management and a major shareholder in the iconic Czech truck producer Tatra face a criminal complaint for allegedly failing to ensure proper oversight of assets. The anonymous plaintiff claims that the sale of truck parts at knock-down prices to India via an intermediary British company has damaged the company.

Václav Láska, a former high-ranking police investigator, lawyer and one-time head of the local branch of watchdog Transparency International, has lodged a criminal complaint against the management of Tatra trucks and one of the firm’s major shareholders, Indian businessman Ravinder Kumar Rishi, on behalf of plaintiffs who wish to remain anonymous due to fears of “labor persecution”, the daily Právo reported on Wednesday.

Vectra allegedly profits from Tatra’s loss

Since 2005, Tatra has supplied so-called complete knock-down kits (CKD), containing all the components of haulage  Láska claims that between 2005 and 2010 Tatra lost profits of around Kč 270 million trucks to the Indian state-owned firm BEML, which then assembles the vehicles in India. The transactions have been conducted through British-registered intermediary firm Vectra Limited, which, according to the charges, has frequently purchased the CKD kits at below production cost, thus causing losses to the Czech company running into millions of crowns.

“The Tatra company sells kits to the British company Vectra Limited without a profit margin, and even at prices lower than the cost of manufacturing. All margins from this business, i.e. all profits from these transactions, go only to the accounts of the British company,” Láska told Právo. “The fact that the representatives of Tatra allow these transactions clearly contradicts the principles of sound economic governance.”

Láska claims that between 2005 and 2010 Tatra lost around Kč 270 million in potential profit. The calculation is based on a profit margin of 10 percent per kit, which he says the management intentionally forfeited in order to sell the goods to Vectra Limited at a knock-down price. Láska also says that through the transactions the company also avoided paying tens of millions of crowns in tax.

“By transferring the considerable profits to the British company, the Tatra company reduced its income tax payments by tens of millions of crowns,” Láska said.

Alleged misuse of information

Ravinder Kumar Rishi, deputy chairman of Tatra’s supervisory board, is also the owner of Vectra Limited and thus de facto represents both Tatra and Vectra in business negotiations — and the transactions in question. According to Láska, Ravinder Kumar Rishi may have misused information in these business relations.

In 2010, Tatra supplied 600 CKD kits to the Indian company Beml — which assembles the trucks and has large orders with the Indian army — and according to Láska, Tatra has committed to deliver a further 460 kits this year. “If the criminal complaint is deemed to be justified, steps could be taken which will curtail further losses and also stop additional tax evasion,” Láska told Právo.

The question to be answered is this: If a criminal complaint was filed against the company and Ravinder Kumar Rishi by the Czech republic for merely causing a loss of 10% on profits foregone due to under invoicing a year back, then what action did the defence Minister take against Vectra which as a middleman had supplied trucks at more than 100% the amount for which Tatra sold in the open market? This scam was going on for the past ten years.

Rishi cheated Czechs by 10% but the Indians by more than 100%.

I will bet top dollar that the anonymous plaintiff referred to in the article is an Indian source who had no faith in the Indian system to act and therefore chose to go through the head of Transparency International. Could it be the good General or a source close to him? Your guess is as good as mine.

It is difficult to believe that the Czech authorities did not correspond with the Indian government within the past one year. They do have an embassy in India. Where are the records of the correspondence?

The General was made to pay the price for his anti-corruption crusade in the Sukna land scam and the Adarsh Society scam, including the court marshaling of Lt. Gen. Avadesh Prakash, who was Military Secretary under General Deepak Kapoor.

It is time that Mr Antony realizes his mistake. He is surrounded by corrupt people who are using his reputation as a shield.

What is at stake is the loss of faith of the people in honest ministers. Manmohan Singh and then Mr Antony. What good is the virtue of honesty? Is there any hope of redemption left for the country?

The General will go in a blaze of glory but the Minister will not.

And for those who are aligned with the arms mafia and ask for the reason as to why the General did not take action on the Tatra scam? Against whom would he take action? Procurement of defence equipment is not under his charge. Did you expect him to take on the retired generals and ex-Chiefs who were paid off for signing the document that he refused to sign? Would there be any proof? Where would that get him? Would you take on a ex-defence Minister or a corrupt Minister in the Cabinet? Was the issue of Bofors pursued by the Army Chief?

A General is not a General if he is not a good tactician. General VK Singh proved to be a master tactician in the manner in which he took on the entire system of corruption in the Army and in the Ministry. This General showed that he had earned all his stars. The nation could give him one more.

In the end the General proved to the nation that even the most honest politician of our times is not good enough to prevent the huge corruption that infests defence deals.

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)